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I spend most of my time thinking about how the prices in the capital markets affect your mortgage rate. But I've been getting more questions about how property ownership works lately. Because the housing market is so expensive, more buyers are looking for creative ways to buy a home, and tenancy in common keeps coming up.
People don't tell you this right away: it's more common than you think to buy a house with someone who isn't your spouse. A lot of people don't know how important the legal structure is. Last week, I looked over some market data and found that this type of deal is becoming more common for a lot of buyers, especially in expensive markets where pooling resources makes homeownership possible.
TIC, or tenancy in common, is a legal way for two or more people to own a property together. What sets it apart? Being able to change. You don't need to have equal parts. You don't have to be family. And most importantly, you decide what happens to your share when you die.
To put it another way. Picture you and a friend buying a house by the lake. The total cost of the purchase was $400,000, with you putting down $250,000 and them putting down $150,000. You own 62.5% of the land. They have 37.5%. But here's where people get confused: even though you have different percentages, you both have full access to the whole property. Your 62.5% doesn't mean you get the master bedroom and they get the guest room. That means you own 62.5% of everything.
The housing market in 2025 has made people more interested in other ways to own a home. Freddie Mac's 2024 study of home buyer trends found that more and more first-time buyers are teaming up with friends or family members to buy a home in order to get around down payment problems. In major cities, the median price of a home is more than seven times the median income of a household. Shared ownership goes from being strange to being useful.
What I'm seeing in the capital markets shows this change. We're putting more non-traditional ownership structures on the market, and lenders are getting better at underwriting them. We at AmeriSave have created special underwriting rules for TIC arrangements that take into account the unique risks that come with these types of ownership. Our team works on these deals all the time, and to be honest, they're starting to feel more like routine than exotic.
"Undivided interest" is what makes TIC legal. This is probably the part of the whole thing that people get wrong the most. If you own a percentage of a property under TIC, you don't own a specific part of it; you own a percentage of the whole thing.
Let me go through a real-life example. Let's say three friends buy a rental property for $600,000. Friend A puts in $300,000, which is half of the total. Friend B puts in $180,000 and gets 30% of the business. Friend C gives $120,000 for a 20% stake in the business. The deed for each person will say what percentage they own, but they all have access to the whole property.
Three important things depend on how much of the business you own.
First, money problems. Friend A owes $6,000 if the property tax bill is $12,000 a year. Friend B has to pay $3,600. Friend C has to pay $2,400. The same math works for everything, like mortgage payments, insurance, and maintenance costs. But here's the problem: the taxing authority doesn't care about the percentages if Friend C doesn't pay their $2,400 in property taxes. They can go after all owners for the whole amount. The National Association of Realtors' 2025 Legal Issues Survey says that 34% of all TIC-related lawsuits are about disagreements over how to share costs.
Second, the money made from the sale. Each owner gets their share of the net proceeds after paying off debts and closing costs when the property sells.
Third, the ability to vote on big choices. Most TIC agreements say that major decisions need to be approved by a certain percentage of owners, but your operating agreement should make this clear.
You have a lot of freedom over your share as a TIC owner. That freedom can lead to problems. You don't need permission from your co-owners to sell your share to anyone at any time. You can use your share as collateral for a loan and borrow against it. You can give your interest to your heirs through a trust or a will.
You can't make changes or improvements to the physical property without the other owners' permission. Even if you're willing to pay for the whole thing yourself, you can't just decide to add a pool or remodel the kitchen on your own. The property is still a shared asset. There must be agreement for big changes.
At AmeriSave, we've seen times when one owner wants to refinance their mortgage but the property is used as collateral. That gets hard very quickly. Our capital markets team works with underwriters to put these deals together. They're not all the same, but we've made workflows that help us handle them.
I believe in matching structures to their uses. TIC works great in some situations.
TIC arrangements are often used by real estate investors to pool money for bigger deals. Three investors might pool their money to buy a $2 million multifamily property that none of them could afford on their own. RealtyTrac's 2025 Investment Property Report says that 22% of all investment property purchases are made by multiple unrelated owners using TIC structures.
The best part is that you can set ownership percentages to match actual capital contributions instead of making everyone split it evenly. If Investor A puts down 50% of the down payment, they own 50% of the property. Fair is fair.
I've seen this happen over and over again in Austin's housing market. Two friends don't want to pay rent anymore. Neither of them can get a mortgage on a good property by themselves. They can do it together. They use TIC instead of joint tenancy because, let's be honest, they don't plan to leave their share to each other when they die. They want their share to go to their own families.
This is where TIC really shines. There is no automatic transfer to your co-owner when you die. Your will or trust decides where your interest goes. We see this all the time at AmeriSave with co-borrowers who aren't married, and we've made our application process easier to fit it.
TICs are often bought by extended families or friends who have known each other for a long time. Four families might buy a beach house, and the percentage of ownership would depend on how much money each family put in. A detailed TIC agreement lays out how the property will be used and who will be responsible for maintenance.
The 2024 Shared Ownership Study by the American Resort Development Association found that family vacation property ownership has grown by 18% since 2020. TIC arrangements are the fastest-growing type of ownership in this group.
I need to be honest with you: a full, written TIC agreement is not up for discussion. The deed sets the percentages of ownership, but the TIC agreement covers everything else, and that's where disagreements come up.
Your TIC agreement needs to include more than just matching ownership percentages when it comes to cost-sharing formulas. Say who pays what, when, and how. What happens if someone is late? Is there a time to be kind? Fees for being late? These details are important because money problems ruin relationships faster than anything else.
When it comes to vacation homes or shared living spaces, make it clear who can go when. I've seen friendships end because of fights at lake houses over the Fourth of July weekend. Everyone should know about the usage rights and schedules in your agreement ahead of time.
There needs to be a clear definition of who is responsible for maintenance. Who makes sure that repairs happen? Who gives contractors the green light? How much do you need to get group approval before one owner can just take care of it? No one wants to argue about who has the right to fix the water heater when it breaks at 10 PM on a Saturday.
The buy-sell terms are very important. Include clauses that give current owners the right of first refusal, which means they can buy a departing owner's share before it goes to someone else. Tell us how the property is valued for sales within the company. The 2025 Real Estate Dispute Report from JAMS Mediation says that TIC disputes that go to court cost each party an average of $47,000 in legal fees before they are settled.
Your agreement must have ways to settle disagreements. Mediation? Arbitration? Don't leave this open-ended. And talk about exit strategies in detail. What makes a forced sale happen? What do you do with partition actions? Can one owner make the sale happen, and if so, how?
Most people write these contracts when everyone is happy about the purchase and getting along well. That's when you should really think about the worst things that could happen. A good real estate lawyer can write a TIC agreement for between $1,500 and $3,000, which is a very good use of your money.
From a capital markets risk perspective, TIC arrangements make things more complicated, which affects the availability and cost of mortgage financing.
There are two main ways that lenders deal with TIC mortgages. The easiest way is for all the owners to apply for one mortgage together. The lender looks at the borrower's credit, income, and assets as a whole. Everyone who owns the note signs it. Everyone is responsible for the full amount of the mortgage.
The messier way is to get individual financing. Each owner gets a mortgage for the part of the property they own. This means that lenders need to be okay with fractional interests. Some lenders aren't. The property is used as collateral for more than one loan, which makes things a lot harder for underwriting and risk management.
We can set up both types of TIC financing at AmeriSave, but before we give you a loan quote, we need to know the full ownership agreement. Because they are more complicated and risky, fractional interest mortgages usually have slightly higher rates, usually 25 to 50 basis points higher. Our underwriting team has seen enough of these deals to know what works and what causes problems later on.
From my point of view, this is where things start to get really interesting. If you bought that lake house five years ago with a 62.5%/37.5% split, You want to refinance your part now so you can get some cash for a home improvement project. Your co-owner doesn't want to get a new loan.
Your co-owner will probably have to agree that your new mortgage takes priority over their interest when you refinance. Your co-owner might ask, "What's in it for me?" This is why a good TIC agreement talks about subordination rights up front.
I need to be honest with you about prices. Lenders think that TIC arrangements are riskier than simple single-owner situations. From the point of view of the capital markets, we're taking into account the chance that one owner will default or want to leave, which will make it harder to get our money back. Fannie Mae's 2024 Lender Sentiment Survey found that 67% of mortgage lenders think TIC arrangements are a moderate to significant risk factor in loan pricing.
Pricing changes, like changes to rates, fees, or both, show that risk. That's just how capital markets work, so there's nothing wrong with that. The most important thing is to go in with your eyes open and work with a lender who knows what TIC structures are and doesn't see them as strange edge cases. We price these deals every day at AmeriSave, so we're not learning anything new from your transaction.
I'm not a CPA, but I work with them a lot when I set up complicated deals. It's important to know the tax implications of TIC arrangements.
In one important way, property taxes don't care how much of the property you own. Liability is both joint and several. If one co-owner doesn't pay their share, the taxing authority can go after any owner for the full amount. You would then have to go after your co-owner separately to get their share back.
Smart TIC agreements include clauses for impound accounts or mandatory escrow arrangements to stop this from happening. Some co-owners open a joint checking account just for property costs, and each owner must keep their share as a minimum balance.
If your TIC property makes money from renting it out, each owner must report their share of the income and expenses on their own tax return. IRS Publication 527 (2024), Residential Rental Property, says that co-owners must divide income and deductions based on their ownership percentage unless they have a written partnership agreement that says otherwise.
This could actually help you out. You can deduct 60% of the mortgage interest, property taxes, depreciation, repairs, and other qualifying costs on your Schedule E if you own 60% and your co-owner owns 40%. Your co-owner can deduct 40%.
When you do sell your TIC share, you will have to pay capital gains tax on the profit you made. The tax calculation is based on how much of the original purchase price you own compared to how much of the sale price you own, taking into account improvements and other factors.
If the property was your main home, you might be able to use the Section 121 exclusion, which lets single filers keep up to $250,000 in capital gains tax-free and married couples filing jointly keep up to $500,000. But things get complicated with TIC arrangements. You must pass the ownership and use tests. This means that you must have lived in the property as your main home for at least two of the five years before the sale.
I've been doing this long enough to see patterns in how TIC arrangements go wrong. Planning ahead can help you avoid most problems.
This is by far the biggest mistake. It doesn't matter if they're friends, siblings, or business partners. Write down everything. Memories fade away. Things change. Arguments come up. LegalZoom's 2025 Property Dispute Analysis says that 78% of TIC-related legal disputes are between co-owners who didn't put their agreement in writing beyond the basic deed.
I'm talking about a detailed operating agreement that spells out how to share costs, who has the power to make decisions, who can use what, how to leave, and how to settle disagreements. Get a lawyer to write it. Don't use a template you found online that isn't specific to your needs. When we underwrite a TIC mortgage at AmeriSave, we always ask to see the operating agreement. It tells us if the co-owners have thought things through or if we're putting money into a disaster that will happen in the future.
Different owners have different amounts of money.
Three friends buy a house together. Five years later, one of them loses their job and can't pay their part of the mortgage. What do I do now? The other two have to pay for it or the whole property could be taken back.
Smart TIC agreements have clauses that deal with short-term financial problems. For example, if one owner misses a payment, it could turn into a loan from the other owners, with interest, secured by the struggling owner's interest. Without these rules, you're just guessing what to do in a crisis.
Any co-owner can ask the court for a partition action, which can force either a physical division of the property or, more often, a court-ordered sale. Once that starts, no one wins. The costs of legal work add up. At auction, the property often sells for less than its market value. Relationships fall apart.
Good TIC agreements have mediation and arbitration clauses that say that everyone must try to negotiate in good faith before anyone can go to court. They could include buyout clauses or plans for leaving in stages.
What happens when one of the owners dies? Their share goes to their heirs according to their will or the laws of the state. All of a sudden, you own something with people you may not know or didn't choose. What if those heirs want to sell right away, but you want to keep the property for a long time?
Take care of this ahead of time. Some TIC agreements have buy-sell clauses that go into effect when someone dies. These clauses give the surviving owners the right to buy the deceased owner's share at a set price, usually fair market value as determined by an independent appraisal.
Disability brings up similar issues. Who decides what to do with a co-shareholder's share if they can't take care of their own business? If co-owners set up living trusts or powers of attorney, it can help avoid problems with guardianship.
I've worked in mortgage operations and capital markets for 28 years. I've learned that the way you own property should match your real life, not how you think things should work.
Tenancy in common is a real option for people who want to own property in a different way. You can buy property with friends, family, or business partners and still keep different ownership stakes and inheritance rights. You can buy a home or invest in real estate that you might not be able to afford on your own.
But with that freedom comes responsibility. You need very strong agreements that cover every situation you can think of and a few you can't. You need co-owners you can trust to pay their bills. And you should know what your exit plan is before you go in.
We often help borrowers at AmeriSave who are trying to figure out TIC arrangements. Our underwriting team knows the details, and our capital markets pricing is based on a realistic assessment of risk instead of just avoiding it. If you're thinking about buying a TIC, we can explain how the financing works and help you set up a mortgage that fits your unique ownership situation. We know which details are important and which ones aren't because we've done enough of these transactions. Usually, we can tell right away if your proposed arrangement will work or needs to be changed.
The most important thing is to go in with your eyes wide open, good legal documents, and realistic expectations about the pros and cons. TIC arrangements can make owning property easy and profitable for everyone involved if they are done correctly. If done wrong, they can cause costly legal problems that ruin relationships and cost everyone money.
The most important difference is what happens when the owner dies. In a joint tenancy, the deceased owner's share automatically goes to the other owners through right of survivorship, no matter what their will says. If you die without a will, your share goes to whoever you name in your will, or, if you die with a will, it goes to whoever the state says it should. Also, in joint tenancy, all owners must have the same amount of ownership, but in TIC, owners can have different amounts. For joint tenancy, there must be "four unities": time, title, interest, and possession. For TIC, there only needs to be unity of possession. TIC is better for most unmarried co-owners because it gives them more options and fits better with what they really want to do with their inheritance. The choice depends on how well you get along with the other owners and what you want to do with your estate.
Yes, you can sell, transfer, or give away your ownership share without getting permission from your co-owners. But there are some practical limits. Finding a buyer who is willing to buy a fractional interest in a property that they will co-own with strangers is hard because these deals usually sell for less than the market value. Second, most well-written TIC agreements have right-of-first-refusal clauses that let current owners buy your share before you sell it to someone else. Third, if the property has a mortgage, the lender may have rules about transfers that could cause a due-on-sale clause to kick in. Real estate transaction data shows that about 65% of TIC shares that are sold go to current co-owners instead of new buyers. Before putting your share up for sale, read your TIC agreement carefully and talk to a real estate lawyer about any rules that might stop you from transferring it.
This is one of the most common and most difficult problems that come up in TIC arrangements. Legally, all tenants in common are responsible for paying things like mortgage payments, property taxes, and insurance premiums. This means that creditors can go after any owner for the full amount owed, not just their fair share. If one co-owner doesn't pay their share, the other owners have a tough choice: they can either pay the difference to keep the property from going into foreclosure or tax liens, or they can risk losing all of their money. Recent lending data shows that properties with more than one owner are 23% more likely to default during economic downturns than properties with only one owner. If you do pay for a co-owner's missed payments, you can get that money back legally by putting a lien on their ownership interest or filing a breach of contract claim based on your TIC agreement. A well-written TIC agreement that spells out what happens if someone doesn't pay and sets up escrow accounts for shared costs is the best way to protect yourself.
Yes, but only as a last resort because it's expensive, takes a long time, and usually ends up with lower-than-market sale prices. Any tenant in common can ask the court for a partition. The court will first try to partition in kind, which means physically dividing the property among the owners. However, this is not often possible with residential real estate. More commonly, the court orders partition by sale, forcing the property to be sold at auction with proceeds divided according to ownership percentages. Because court-ordered sales are rushed, properties sold through partition actions usually go for 15% to 25% less than similar sales on the market. Try everything else before you file for partition. Most TIC agreements have clauses that say you have to go to mediation or arbitration and try to work things out before going to court. First, offer to sell your share to the other owners. They might be willing to buy you out to avoid a forced sale. Partition actions hurt relationships for good and cost everyone a lot of money in legal fees, usually between $15,000 and $50,000 per party, depending on how complicated the case is.
You need to get the agreement of all the current owners and follow a few steps to add a new tenant in common to an existing arrangement. First, all current owners must agree to the addition. You can't add someone without everyone's permission. Second, the property deed needs to be changed, and the county recorder's office needs to record a new deed that shows the new ownership structure and percentages. If you're adding another person to the ownership group but keeping the same total, the current owners will have to lower their percentages to make room for the new owner's share. Third, if there is already a mortgage on the property, you will need to let your lender know. Adding an owner could also trigger a due-on-sale clause that requires full loan repayment or lender approval. Fourth, you will need to change your title insurance policy to show the new ownership structure. Lastly, you need to change your TIC operating agreement to include the new owner and spell out their rights, duties, financial responsibilities, and how they can leave. You will need a real estate lawyer to write the new deed, check the lender's requirements, and update your TIC agreement. The total cost usually falls between $2,000 and $5,000, depending on how complicated it is.
How the property is used affects how taxes are handled for TIC ownership, but there may be benefits. If you own an investment property that makes money from rent, each tenant in common must report their share of the rental income and expenses on Schedule E of their own tax return. This lets each owner take deductions for their share of property taxes, mortgage interest, repairs, maintenance, and depreciation. According to IRS rules, co-owners must divide up income and deductions based on their ownership percentage unless they have a formal partnership agreement. You might be able to get the Section 121 capital gains exclusion when you sell your home if you live there as your main home. This lets you keep up to $250,000 in tax-free gains if you file as a single person or $500,000 if you file as a married couple. Your federal return can only deduct up to $10,000 for state and local property taxes. However, you can deduct your percentage up to that amount. TIC ownership gives you options for estate planning because your share goes through your estate. This could let your heirs get a step-up in basis, which lowers their capital gains taxes.
When a tenant in common dies, their share of the property does not automatically go to the other co-owners. This is the main difference between TIC and joint tenancy. The deceased owner's share, on the other hand, becomes part of their estate and is distributed according to their will or, if they died without a will, according to state intestacy laws. Estate planning surveys show that about 31% of TIC co-owners do not have wills. This can lead to problems when they die. If the owner died and had a will, their share goes to the people named in that will. These could be family members, friends, charities, or even the other owners if they were specifically named. If there is no will, state law decides who gets the estate. Usually, spouses, children, parents, and siblings are given priority. The result is that the surviving co-owners now have to share ownership of the property with people they didn't choose and may not even know. A well-written TIC agreement will have clauses that deal with the death of a co-owner. These are usually buy-sell agreements that give the surviving owners the right to buy the deceased's share at fair market value within a certain amount of time, usually 60 to 180 days.
Yes, but the way it works is more limited than when you own something by yourself. A creditor who wins a lawsuit against one of the tenants in common can put a lien on that owner's share of the property, not the whole thing. The creditor can then try to foreclose on that fractional interest or force its sale to pay off the debt. However, most buyers don't want to buy a fractional TIC interest at a foreclosure sale, so these interests usually sell for much less than their fair value. According to data from the banking industry, fractional interest foreclosures only get back 35% to 50% of the property's value on average because they are hard to sell. The creditor can't make the sale of the whole property unless all of the tenants in common are responsible for the debt together, like when all of the owners signed a mortgage note together. If just one co-owner has missed payments on a personal debt, like credit cards or medical bills, the creditor can only go after that owner's share. However, the creditor could ask the court for a partition action, which would force the sale of the whole property so that the debtor's share can be paid off.
Yes, all 50 states recognize tenancy in common as a valid way to own property, but the rules and requirements differ from state to state. It's one of the oldest ways to own property at the same time in common law property systems. But states disagree on important things like what kind of ownership is assumed when the deed is unclear, how to divide property, what rights creditors have, and how to protect homesteads. According to state property law surveys, 38 states assume that when a deed gives property to more than one person without saying what type of ownership it is, it is tenancy in common. 12 states, on the other hand, say that married couples must use clear language to create something other than joint tenancy. Some states have rules about TIC arrangements for certain types of property. California has a lot of rules about TIC arrangements in buildings with more than one unit. When TIC interests are sold as investment properties in Florida, more information must be given. When married people are involved, community property states like Texas, Arizona, and Nevada make things even more complicated. For example, spousal consent may be needed even if the spouse isn't taking title. Talk to a real estate lawyer who is licensed in the state where the property is located before entering into a TIC agreement.
Both involve several people sharing ownership of property, but they are very different legal structures with very different effects. A tenancy in common is a way for people to directly own property. Each tenant in common has legal title to a percentage of the real estate itself. A partnership, whether general or limited, is a separate legal entity that owns the property. The partners don't own the property directly; they own shares in the partnership. Partnerships must file informational returns and give K-1 forms to their partners, as required by the IRS. TIC owners, on the other hand, report their share of income and expenses directly on Schedule E. From a tax point of view, both types of ownership allow for pass-through treatment, where income and deductions go directly to the individual owners. However, partnerships have more complicated filing requirements and more freedom to allocate income and losses in ways that don't match ownership percentages. Liability is very different between a general partnership and a TIC. In a general partnership, each partner can be personally responsible for the debts and actions of the other partners. In a TIC, each owner is only responsible for their agreed-upon share of property expenses, but joint and several liability applies to some obligations. When it comes to investment real estate that needs active management, a partnership or LLC structure is often better than a TIC.
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